“This has got bubble written all over it, and I think it is the most irrational, it is the biggest bubble that I have ever seen,” Peter Schiff, CEO and chief global strategist at Euro Pacific Capital, said on Benzinga’s PreMarket Prep Bitcoin Special.

'Speculative Asset At Best'

By Schiff’s assessment, there’s no true scarcity, no limit to the number of cryptocurrencies created, and most are indistinguishable from bitcoin apart from being cheaper, faster — better. At the same time, bitcoin has no perceivable utility (unlike gold) except as a gift.

It’s become too expensive and inefficient for consumer use as a currency alternative, and extreme volatility limits pricing and disincentivizes acceptance as a payment method.

“It’s a speculative asset at best, but anybody who buys it runs the risk that the price could collapse any day,” Schiff said. “Sure, it could keep going up, but eventually it’s going to implode, so you really can’t say it’s a safe haven. It’s a highly speculative asset.”

The underlying concept is not entirely meritless, though.

“I think bitcoin was born as a solution to a real problem,” Schiff said. “But I think unfortunately this is not the solution.”

It can’t protect owners in the case of a monetary crisis because it has no intrinsic value and is not backed by anything substantial, he said.

Money To Be Made On The Short Side

Schiff is confident that the price will eventually crash and fortunes will be cleared in the process. “No question, a lot of money will be made on the short side of these cryptocurrencies as all this paper wealth evaporates,” he said.

To be sure, the bubble is not exclusive to bitcoin. Schiff perceives them “all around” the stock market, the bond market, the housing market, but none are quite like bitcoin.

“The Federal Reserve and foreign central banks have pretty much blown bubbles everywhere with their cheap money,” he said. “This is not a coincidence, but the bubble mentality is nowhere stronger than it is in bitcoin or cryptocurrencies.”

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PreMarket Prep is a daily trading ideas show hosted by former floor trader Joel Elconin and prop trader Dennis Dick. You can listen to the show live and participate in our chatroom every day from 8-9 a.m. ET here. The show is also available on YouTube Live. The podcast is available on iTunes, Soundcloud, and Stitcher.